AGCO’s (AGCO) YTD (year-to-date) returns were worse than the S&P 500 Index as of August 5. AGCO shares gained 7.6% until August 5—lower than the S&P 500 Index’s returns of 8.4%. The company recouped its losses from the impact of its 2Q16 earnings and rose 3.3% on August 5.
Compared to its competition, AGCO stocks seems to be ahead of the pack. Deere & Company (DE) stock, the world’s largest agriculture (MOO) equipment manufacturer, has grown by a paltry 3% YTD until August 5. CNH Industrial’s (CNHI) 7.1% YTD stock returns are a little closer to AGCO’s returns.
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As of August 5, 2016, AGCO was trading at a trailing PE (price-to-earnings) multiple of 21.1x—near its five-year high of 21.7x. In comparison, Deere & Company is trading at a trailing PE multiple of 15.2x—significantly lower than its high of 17x on June 6, 2016. CNH Industrial has the second-largest market share in tractor (DBA) sales in North America. It’s trading at a trailing PE multiple of 18.8x—lower than its five-year high multiple of 26.6x on October 9, 2015. It’s interesting to note that Deere & Company’s operating margin in the last five years has been between 12% and 17%. AGCO’s operating margins have been 4.8%–8.3%. CNH Industrial’s operating margins in the last five years have been 8.9%–9.6%. In 2016, CNH Industrial and Deere & Company’s operating margins are expected to be 5.7%. AGCO’s operating margins are forecast at 4%. Therefore, it seems that markets have punished Deere & Company and CNH Industrials for not being able to maintain operating characteristics. They rewarded AGCO for doing the opposite.